Soon after China woke up on Monday to the news that manufacturing had declined for the fifth month in a row and the services sector was stagnant, its stock market went wild. In just over half an hour, shares valued at €128 billion changed hands in Shanghai, Shenzhen and Beijing, pushing the benchmark CSI 300 index up 25 per cent from where it stood last Tuesday.
The markets were able to brush off the latest gloomy economic data because they are gripped by a bigger story, the rapid fire of policy announcements that have come from Beijing over the past week. After almost two years of tepid, piecemeal measures to breathe life back into the Chinese economy after the coronavirus pandemic, the authorities appear to have moved into emergency mode.
It started last week with the People’s Bank of China cutting key interest rates and reducing the amount of cash banks need to hold in reserve. It also promised measures to make share buy-backs easier for companies and to pump billions into the stock market.
Over the weekend came help for mortgage holders as rates for existing mortgages were cut to the same level as those for new ones. And on Sunday night, the cities of Shanghai, Shenzhen and Guangzhou said they would remove all remaining restrictions on home purchases.
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In the middle of it all, the Communist Party politburo brought forward to last week a discussion of the economy and signalled more support for the struggling property sector. Until now, most of the action has been on the monetary side but the next moves will be fiscal measures.
[ China unleashes stimulus in bid to lift growthOpens in new window ]
These are likely to include more support for indebted local governments, which provide most of the public services in China and cash support for families with more than one child. There could also be measures that will boost the income of China’s approximately 300 million migrant workers who have their homes in the countryside but live in cities.
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